Turmoil breaks out in wholesale market, Mondelez sets up its own network

Wholesalers throughout Greece are in turmoil. This is because more and more of the large food companies are deciding to have a more active role in the ordering of their products from networks with their own sellers and choosing exclusive partnerships with a few but solvent wholesalers, thus accelerating concentration trends in the sector.

Consequently, small wholesalers are threatened with closures and small food-producing companies will soon face a distribution problem, since neither can they develop their own network, nor can they attach themselves to a large wholesaler that will have entered into cooperation with a multinational.

Previously, all food companies worked with wholesalers to supply supermarkets, grocery stores and kiosks with their products. Along the way, however, the companies found that wholesalers had gained a lot of power and become regulators of their profit margins.

So they decided to hire their own vendors for orders from networks and to cooperate exclusively with certain wholesalers in the distribution, offering them larger geographical areas of action but a smaller percentage of turnover. The first company to do this was Tasty and the wholesalers lost the crisp products.

Chipita's successful experiment

In the early 2000s Chipita followed this model with great success, with the majority of wholesalers losing croissants as well. Direct access to retail gave Chipita an advantage as its products had a short expiration date.

In fact, until today, 150-200 wholesale companies in Greece rely on the sales of the products of four companies: ION, Mondelez (Lacta, Oreo, Philadelphia, Cadbury, etc.), Papadopoulos Biscuits and Bingo.

However, after the acquisition of Chipita by Mondelez, the American multinational has decided to make use of Chipita's network, dealing another big blow to the wholesaler industry. This decision also comes as a result of certain debts owed to the company from some wholesalers in the past.

The goal is to enter into partnerships with a few wholesalers with financial standing who can easily issue guarantees. Tobacco wholesalers, who are used to working with little credit, are considered as such.

When Mondelez's plan is implemented, there will be a clear risk that wholesalers will run out of liquidity, since their turnover will be reduced and they will ask for more credit from their remaining customers, ION and Papadopoulou Biscuits.

Challenging conditions are set to arise, if talk is confirmed that ION, after the acquisition of Spyros Theodoropoulos, will also set up its own sales network and cooperate selectively in distribution with certain wholesalers.

Either way, concentration trends in the wholesaler industry are growing, with the powerful becoming even stronger and the smaller players facing survival issues. The environment that is being created will also cause problems for small food-producing companies, which will be excluded from the large distribution networks.

The large wholesalers make turnover of almost 80 million euros, with up to 100 employees, while the majority of wholesalers show turnover of around 4 million euros and employ around 20 people.